When the United Kingdom (UK) voted to leave the European Union (EU) last month, shockwaves reverberated from across the pond to here in the United States, including in the global supply chain industry and insurance markets. However, leaders of the London commercial marine market were quick to calm fears, with John Nelson, chairman of Lloyd’s, assuring policy holders across the world that it’s ‘business as usual’. In fact, within 20 minutes of the official result being announced, Nelson said the market had drawn up contingency plans and was “fully equipped” to operate outside the European single market.
Nelson in his statement said, “I am confident that Lloyd’s will stay at the center of the global specialist insurance and reinsurance sector, and I look forward to continuing our valuable relationship with our European partners…For the next two years our business is unchanged. Lloyd’s has a well-prepared contingency plan in place and will be fully equipped to operate in the new environment.”
Dave Matcham, CEO of the International Underwriting Association of London (IUA), also released a statement saying that the London insurance market is “resilient” and “well-positioned to respond to the result of the referendum on the UK’s membership of the EU”. He also said that insurers have been preparing for the possibility of a vote to leave and had considered how to adapt their business plans in response to new trading conditions.
Among others that also commented on the UK’s decision to leave the EU was Standard & Poor’s (S&P), saying that the leave vote is not expected to lead to rating actions on UK insurers. “We see the insurance sector as less exposed to the leave vote than the rest of the financial sector.”
The insurance sector represents about one-third of the UK’s financial services net export surplus, but it is more reliant on trade with non-EU countries – especially the US, said S&P, noting that the sector is also a “very limited recipient of inward investment.”
“Even in the absence of any trade agreements or passporting rights, we believe that UK insurers operating in the EU could, through appropriate planning, continue their businesses largely uninterrupted. The same would apply for EU insurers who currently trade in the UK through branches,” said S&P.
The ratings agency also acknowledged that there will be a period of uncertainty while treaties or other arrangements are negotiated between the UK and the EU, which could weigh on insurers’ investment returns and possibly on the rate of future economic growth. “However, we do not now believe that these potential issues are likely to lead to immediate rating actions on insurers.”
Roanoke Underwriting specializes in providing agent and brokers with commercial marine insurance solutions for global trade and logistics risks, and will continue to keep you abreast of any impact Brexit may have on our industry. For more information about our portfolio of products, please contact us at 1.855.213.4545.